Office Cap Rates Trended Downward Throughout 2021

National Office Cap Rate Report

National office cap rates continued their downward trend, finishing the year at 6.45%, down over 50 basis points (bps) from the Q1 2021 figure of 7.02%. High-quality office assets, with long-term credit tenancy and located in highly desirable neighborhoods continue to drive investor demand.

The preponderance of transactions for upper tier assets and the limited number of Class B and C office transactions was a significant contributory factor to the steady rate compression indicated by the trendline.

Total number of office transactions in Q4 2021 were down 51% from Q4 2020 and remained significantly below peak levels experienced in 2018. The volume of transactions was lowest in the dense Northeast office market, while the highest volume of transactions was in the Southeast market, where population growth and household relocation are strongest.

Source: Valuation VIEW
Data points are confirmed closed transactions adjusted for assumed financing and reflect overall market trends.

U.S. Office Cap Rate Trends